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Osaka Matsui Management Says SBI Card’s IPO Rallied Over 39% on First Day of Trading

OSAKA, Japan–Osaka Matsui Management has reported on Indian based payment solutions provider, SBI Cards and Payment Services, as its initial public offering opens with a price band of Rs 750-755 per share.

The issue is priced at nearly 48 times the earnings per share (EPS) of the first half of FY20 (annualised) of Rs 15.6 and approximately 16 times book value of equity per share (BVPS). It does not have any listed peers on domestic stock exchanges.

The SBI Card IPO will be the fifth-largest IPO of the country, preceded by the likes of Coal India, Reliance Power and ONGC.

Analysts from Osaka Matsui Management noted that an issue size of Rs 15,475 crore, Coal India’s IPO, which arrived in 2010, has topped the chart of the largest IPOs. This was closely followed by Reliance Power IPO which arrived in 2008 with an issue size of Rs 11,700 crore. In the third spot is General Insurance Corporation of India IPO, arriving in 2017 with an issue size of Rs 11,372 crore.

Because of its strong market position, revenue strength, improving profitability and stable asset quality, SBI Card has fetched buy signals from analysts and brokerages.

“Given SBI Card’s strong market position, revenue strength, improving profitability and stable asset quality, we remain optimistic for the long-term. Furthermore, with rising disposable income, a young Indian population, a surge in the use of credit cards for personal spending and the government’s increasing support towards digital payment services, we believe that the macro traits are in our favour in the domestic card industry,” said Michael Carter, Head of Global Equities, Osaka Matsui Management.

For the short-term, despite a higher valuation, experts say the stock will give the listing gains. In the long-term, the stock could continue to command rich multiples, since it is the only pure-play card company in India.

“One may become more wary of valuations after listing gains however, the company can thrive through this growth opportunity,” added Alistair Richmond, Head of Global Equities, Osaka Matsui Management.

Besides, the fact that the company’s card portfolio is largely unsecured is a risk. The emergence of competition is also something that will test the strength of the company.

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